Wallop, a company spun out of Microsoft and backed by veteran venture capital firms, today launched its beta product, a breakthrough innovation in the social networking space with a unique business model. Wallop, an invitation-only network, for the first time combines a social networking site with a marketplace, enabling an entirely new way to self-express and enhance a person’s increasingly important online image. Central to Wallop’s business model will be Adobe® Flash developers and designers who will sell their personal creations on Wallop’s marketplace. Now Flash experts, who have been responsible for many of the most innovative Web concepts, can make money doing what they love without any of the business hassle.

Wallop’s marketplace model empowers users to further enhance their online image by purchasing ready-made, interactive forms of self-expression, or what Wallop calls “Mods” from Flash developers and designers who are members of the Wallop Modder Network (WMN). Thanks to this rapidly growing group of Modders, Wallop’s marketplace is populated with original Flash content, such as interactive characters, stylistic backgrounds, graphical features and games, ready for purchase by the broad market of Wallop consumers.
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More than four years of research at Microsoft combined with Wallop founders Karl Jacob and Sean Uberoi Kelly’s vision for leapfrogging existing social networks, led Wallop to focus on the larger trend of self-expression online with the simplicity people experience in the real world.

Unlike the other social networks, Wallop CEO Karl Jacob says he has no plans to ever put advertising on the site. It just lessens the user experience, he says. Instead, Wallop wants a piece of the $3 trillion per year U.S. market for self expression items (clothes, furniture, beauty supplies, etc.). As sites like Cyworld have shown, people are willing to spend money for online expression items, too (Cyworld brings in a reported $300,000 per day in microtransactions to its users).

So Wallop has created a marketplace for “self expression” items on the site. Flash developers can create items and sell them to users. Music clips, animated widgets, artwork, avatars, clothing for avatars, etc. will all be for sale. Wallop handles payments and DRM, and takes 30% of the sale price. The rest goes to the seller.

At the moment, membership in Wallop is by invitation only from someone who is already a member or by asking for an invitation at http://www.wallop.com/.

OOPS! We hadn’t planned to talk about this yet but some Web pages went live overnight and well, we decided we might as well turn on the blog and give you the straight scoop. You’ll be seeing more on this blog about our team and our product as the days go by. In the meantime here are some more details about what we are doing.
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Windows Live QnA gives us an opportunity to showcase unique knowledge – provided, filtered, rated and approved by human beings – not available anywhere else. QnA allows people to ask questions of their knowledgeable friends, family, classmates at school, professional and community peers in a way that others around the world can benefit from the answers. We want to build the biggest, friendliest and most helpful community of smart humans the world has ever seen. Some people will love the fame and recognition that answering questions will bring them; others will appreciate getting answers quickly and easily.

April 26, 2006

Microsoft Corp. today announced the spinout of a new social networking technology, developed by Microsoft Research, to create a new Silicon Valley startup, Wallop Inc. Wallop, whose aim is to deliver the next generation of social computing, is led by experienced entrepreneur and CEO Karl Jacob, with 30-year veteran Bay Partners providing Series A financing.

Microsoft IP Ventures will celebrate its one-year anniversary next month. “We’re excited by the interest it has attracted with entrepreneurs and the venture capital community,” said Eric Rudder, senior vice president of Technical Strategy for Microsoft. “Microsoft has one of the world’s preeminent R&D labs, and we are committed to getting our innovations into the hands of entrepreneurs. This deal is another great example of Microsoft working with the right team to get this next-generation technology into the marketplace quickly.”

There’s more there and from Microsoft’s Don Dodge about the Microsoft IP Ventures program where Microsoft licenses technologies they have no immediate commercial use for to entrepreneurs. It’s more than just patent licensing though – in this case, Microsoft took a stake in the company.

As for Wallop itself, it’s yet another of the social networking sites like MySpace that hopes to attract eyeballs and presumably thereby sell advertising. Micahael Arrington notes that the current mywallop.com is not what the ultimate site at wallop.com will look like and:

I’ve seen a bit of what they plan to offer, and I’ll say that this is not another “me too” social network offering. And there are a number of unique business model twists that they aren’t announcing yet. The launch is scheduled for this summer. One interesting thing to note: the current Wallop site is all-Flash. hmmm.

Arrington has more on the Wallop CEO, Karl Jacob, as does the press release.

I continue to retain my skepticism about the business aspects of the cloud of Web 2.0 social networking fluffiness exemplified by MySpace and its ilk. Per the press release:

Launching later this year, Wallop solves the problems plaguing current social networking technologies and will introduce an entirely new way for consumers to express their individuality online. For example, today’s social networks have difficulty enabling people to interact in a way similar to the way they would in the real world. Wallop tapped legendary Frog Design Inc. to conceive a next-generation user interface enabling people to express themselves like never before. In addition, Wallop departs from the friend-of-a-friend model common in all social networks today and the root of many of their problems. Instead, Wallop developed a unique set of algorithms that respond to social interactions to automatically build and maintain a person’s social network.

Whatever (although recent Microsoft offerings are based on apparently different formulations of a person’s social network).

It’s not that there is no market for online “social networking,” since it’s been evident ever since man invented modem that a large part of what was going on was people interacting socially with each other. The difficulty is the faddishness of the activity where yesterday’s Hula Hoop (e.g. Usenet, BBS, AOL) is soon catching dust in the garage and hordes of wannabees (e.g. The Source, Compuserve, Prodigy) didn’t even achieve that. The commercial trick is to be the first mover in a fad and make hay while the sun shines because inevitably your fadshare will get diluted by imitators and interest will dim as the ever fickle audience moves on.

For an entrepreneur hoping to capitalize on social networking, nimbleness and a lot of luck are survival, but for a large company like Microsoft the former is increasingly unlikely (if not always admitted) and the latter is really unnecessary. Microsoft can afford to attempt its own social networking offerings and also make widely placed insurance bets as long as the competitive overlap isn’t glaring, and that’s what Wallop appears to represent. Beyond that, of course, I’m sure Microsoft is perfectly willing to act as an “arms seller” and build a nice business selling their usual technologies (not Flash of course) and ads to the combatants without waiting and hoping for lightning to strike their own particular offerings.